Every couple of months, my law firm holds seminars discussing Estate Planning, Trust Administration, Probate, Medi-Cal and other Elder Law topics. Usually at the end, three or four people will come up to me and ask very specific questions about the duties of a trustee. Some are posed by parents who are concerned about making things easy for their trustee children after they’re gone. Others are the children themselves, who want to know what responsibilities they will have once their parents pass.
To address the uncertainties of both parties, I’ve compiled a list of the most Frequently Asked Questions I’ve received regarding the role of a trustee.
FAQ #1: What’s the difference between a trustee and an executor?
The terms are often used interchangeably and while they have analogous responsibilities (distributing assets according to your wishes, making sure debts are paid, etc.), there are several key differences between a trustee and an executor.
First and foremost, a trustee deals with a Revocable Living Trust, and an executor pertains to a Last Will and Testament.
When you pass, your successor trustee takes over for you. A successor trustee’s job is to administer your estate pursuant to the terms you laid out in your trust (e.g., gift $5,000 to your church and transfer the home to your children).
A successor trustee’s responsibilities may be ongoing, depending on how your provisions are drafted. For example, if you wanted your grandkids to inherit $100,000 for college but they are only minors when you pass away, then the successor trustee will have to manage the funds until they become of age.
Like a successor trustee, an executor is also expected to carry out the terms you laid out except within your Last Will and Testament. The main difference is that an executor must deal with probate, while a successor trustee does not. Probate is the court-supervised legal process of distributing one’s property and possessions. It is often expensive, lengthy and tedious.
Although every case is different and there are certainly exceptions, the general sentiment for an average, middle-class family is that it is “easier” to be a successor trustee than it is to be an executor. Thus, a Revocable Living Trust is the preferred estate planning document of choice for most individuals.
FAQ #2: Does a trustee get paid?
A majority of trusts include a provision that states that the trustee is entitled to “reasonable compensation” (though they are not required to take a fee). With ambiguous language like that, you may ask, “What is ‘reasonable’?” Unfortunately, the answer is a very unhelpful, “It depends.”
A trustee’s fee hinges on a variety of factors, including the amount of time put into the administration process, the level of experience and skill the trustee has, the difficulty and complexity of the tasks required and what other comparable trustee’s in the area are charging.
To give you a general idea of what the fee is, a professional trust company like Farmers and Merchants may charge about one percent of the value of the estate as of 2018. A typical Joe Schmo who does not have any expertise as a trustee will probably charge less, unless the situation is extremely complicated.
Taking that into consideration, your next question may be, “Then isn’t it easier to specify a dollar amount or percentage?” Not necessarily.
Many of my clients created their trusts decades ago. At the time, $10 per hour may have seemed fair. But nowadays, the minimum wage (at least in my city) is $10.50 per hour. So, if you cap the fee too early on, it’s discouraging for the trustee, who may put in a lot of his or her own personal time into administering the trust.
FAQ #3: Can I have two people as my trustees?
It’s often difficult for parents to appoint one trustee when they have multiple children. What’s an impartial way to choose, age order? What if you select your son, and your daughter’s feelings get hurt?
One possible solution is to appoint two (or more) individuals as “co-trustees.” That way, both your son and daughter can act as trustee and handle the affairs of the estate together.
While this is a good option for some families, it is not always recommended. If the co-trustees disagree or do not get along, problems could arise, and the administration process could drag on unnecessarily. It is truly a case-by-case determination of whether this type of arrangement is suitable to the family.
Staci Yamashita-Iida, Esq. is an estate planning attorney at Elder Law Services of California. She can be contacted at (310) 348-2995 or email@example.com. The opinions expressed in this article are the author’s own and do not necessarily reflect the view of the Pacific Citizen or JACL. The information presented does not constitute legal advice and should not be treated as such.